Calculating deductions on retroactive pay increases

Make sure to use income tax rates in effect in the year you are making the payment

Question: We are paying a retroactive pay increase to our employees as part of a new collective agreement. The pay raise actually applies to 2011. To calculate income tax source deductions, do I use the rates from 2011 or now? Alternatively, can I use the lump sum tax rates?

Answer: When paying a retroactive pay increase from a previous year, use the income tax rates in effect in the year you are making the payment.

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